Survey shows Nigeria businesses disappointed with Govt on management of inflation

The Business Expectations Survey Report released recently by the Central Bank of Nigeria (CBN) revealed that respondent firms expressed dissatisfaction with the management of inflation by the Government with a negative net satisfaction index of -25.1 in November 2020.

National Bureau of Statistics (NBS) on Tuesday released inflation report for November 2020 which shows headline inflation rose to 14.89percent year-on-year (YoY), that is 66 basis points (bps) higher than the previous rate reported at 14.23percent in October’ 2020.

Though released last Friday December 11, the November 2020 Business Expectations Survey was conducted from November 9-13, 2020 with a sample size of 1050 businesses nationwide.

A response rate of 89.5 percent was achieved and the sample covered the agric/services, manufacturing, wholesale/retail trade and construction sectors. The respondent firms were made up of small, medium and large corporations covering both import-oriented and export-oriented businesses.

“Inflation level is expected to rise in the next 6 and 12 months, while borrowing rate is expected to rise in the current month, next month, next 2 months and the next 6 months,” the report disclosed.

Read Also: Heightened insecurity adds to dollar squeeze as inflation nears 3-year high

Respondent firms’ opinion on the volume of business activities indicated a favourable business outlook for December 2020 and January 2021 with indices of 56.0 and 61.4, respectively.

Businesses also hope to employ in December 2020 and January 2021 as the outlook was positive at 19.1 and 22.3 index points, respectively.

The break down by sector showed that the wholesale/retail trade sector with (22.4 points) has the highest prospect for employment in the next month, followed by Agric/services sector with an index of 21.7 points, construction (16.2 points) and manufacturing sector (14.3 points). Respondents were also optimistic about the volume of business activity and employment outlook index in the next 6 months as all indexes were positive.

An analysis of businesses with expansion plans in December showed that the Wholesale and Retail sector has the highest disposition to expand with 50.0 index points. Manufacturing sector has 43.7, Agric/services sector had an index of 39.5 points, construction sector had 34.5 index points.

The Business Expectations Survey Report which is a monthly publication of the statistics department of the CBN noted also that respondent firms expressed pessimism on the macro economy; though respondents were positive in their outlook on volume of total order, volume of business activity, average capacity utilization and financial condition (working capital).

Respondent firms identified insufficient power supply, competition, unfavourable economic climate, high interest rate, unclear economic laws, financial problems, unfavourable political climate, access to credit and insufficient demand as major factors constraining business activity.

The respondent firms expect the Naira to depreciate in the current month but expect it to appreciate in the next month, next 2 months and next 6 months. At -1.5 index points, the overall confidence index (CI) on the macro economy was pessimistic in November 2020. However, respondents are optimistic in their outlook for the month of December with a confidence index of 38.8.

They also expressed optimism in the overall business outlook for January and May 2021 as shown in a greater confidence of the economy at 47.1 and 59.3 index points, respectively. The pessimism on the macro economy in the current month was driven by the opinion of respondents from agric/services (-1.2 points), construction (-0.6 points) and wholesale/retail trade sectors (-0.3 points).

The major drivers of optimism for next month were agric/services (23.1 points) and manufacturing sectors (11.3 points). Further analysis revealed that businesses that are neither import nor export-oriented (-2.1 points) and both import and exporter-oriented (-0.4 points), drove the negative business outlook for the month under review.